Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Allisons Dresswear Manufacturers is preparing a strategy for the fall season. One alternative is to expand its traditional ensemble of wool sweaters. A second option

Allisons Dresswear Manufacturers is preparing a strategy for the fall season. One alternative is to expand its traditional ensemble of wool sweaters. A second option would be to enter the cashmere sweater market with a new line of high-quality designer label products. The marketing department has determined that the wool and cashmere sweater lines offer the following probability of outcomes and related cash flows.

Expand Wool Sweaters Line

Enter Cashmere Sweaters Line

Expected Sales Probability Present Value of Cash Flows from Sales Probability Present Value of Cash Flows from Sales
Fantastic .5 $ 221,000 .3 $ 341,000
Moderate .2 192,000 .4 272,000
Low .3 88,600 .3 0

The initial cost to expand the wool sweater line is $142,000. To enter the cashmere sweater line, the initial cost in designs, inventory, and equipment is $102,000. Calculate net present value if, Allisons Dresswear Manufacturers decides to: (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest whole dollar.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Gold And Debt

Authors: William Lyman Fawcett

1st Edition

1144211727, 978-1144211729

More Books

Students also viewed these Finance questions